Electronic Arts 2012 Annual Report Download - page 178

As of March 31, 2012, we have federal net operating loss (“NOL”) carry forwards of approximately $550 million of
which approximately $216 million is attributable to various acquired companies. These acquired net operating loss
carry forwards are subject to an annual limitation under Internal Revenue Code Section 382. The federal NOL, if not
fully realized, will begin to expire in 2028. Furthermore, we have state net loss carry forwards of approximately $727
million of which approximately $139 million is attributable to various acquired companies. The state NOL, if not fully
realized, will begin to expire in 2016. We also have U.S. federal, California and Canada tax credit carry forwards of
$104 million, $103 million and $30 million, respectively. The U.S. federal tax credit carry forwards will begin to
expire in 2016. The California and Canada tax credit carry forwards can be carried forward indefinitely.
The total unrecognized tax benefits as of March 31, 2012 and 2011 were $274 million and $273 million,
respectively. Of these amounts, $43 million and $37 million of liabilities would be offset by prior cash deposits
to tax authorities for issues pending resolution as of March 31, 2012 and 2011, respectively. A reconciliation of
the beginning and ending balance of unrecognized tax benefits is summarized as follows (in millions):
Balance as of March 31, 2010 ............................................................. $278
Increases in unrecognized tax benefits related to prior year tax positions ......................... 9
Decreases in unrecognized tax benefits related to prior year tax positions ........................ (41)
Increases in unrecognized tax benefits related to current year tax positions ....................... 46
Decreases in unrecognized tax benefits related to settlements with taxing authorities ............... (14)
Reductions in unrecognized tax benefits due to lapse of applicable statute of limitations ............. (12)
Changes in unrecognized tax benefits due to foreign currency translation ........................ 7
Balance as of March 31, 2011 ............................................................. 273
Increases in unrecognized tax benefits related to prior year tax positions ......................... 7
Decreases in unrecognized tax benefits related to prior year tax positions ........................ (4)
Increases in unrecognized tax benefits related to current year tax positions ....................... 58
Decreases in unrecognized tax benefits related to settlements with taxing authorities ............... (1)
Reductions in unrecognized tax benefits due to lapse of applicable statute of limitations ............. (54)
Changes in unrecognized tax benefits due to foreign currency translation ........................ (5)
Balance as of March 31, 2012 ............................................................. $274
During the fiscal year ended March 31, 2011 we reached a final settlement with the Internal Revenue Service
(“IRS”) for the fiscal years 2000 through 2005. As a result, we recorded approximately $22 million of previously
unrecognized tax benefits and reduced our accrual for interest by approximately $10 million.
A portion of our unrecognized tax benefits will affect our effective tax rate if they are recognized upon favorable
resolution of the uncertain tax positions. As of March 31, 2012, approximately $98 million of the unrecognized
tax benefits would affect our effective tax rate and approximately $163 million would result in corresponding
adjustments to the deferred tax valuation allowance. As of March 31, 2011, approximately $137 million of the
unrecognized tax benefits would affect our effective tax rate and approximately $123 million would result in
adjustments to deferred tax valuation allowance.
Interest and penalties related to estimated obligations for tax positions taken in our tax returns are recognized in
income tax expense in our Consolidated Statements of Operations. The combined amount of accrued interest and
penalties related to tax positions taken on our tax returns and included in non-current other liabilities was
approximately $21 million as of March 31, 2012, as compared to $24 million as of March 31, 2011. Accrued
interest expense related to estimated obligations for unrecognized tax benefits decreased by approximately $3
million during fiscal year 2012. There is no material change in accrued penalties during fiscal year 2012.
We file income tax returns in the United States, including various state and local jurisdictions. Our subsidiaries
file tax returns in various foreign jurisdictions, including Canada, France, Germany, Switzerland and the United
Kingdom. The IRS has completed its examination of our federal income tax returns through fiscal year 2005, and
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